Abolishing radical rent controls has failed – Britain needs a rethink (2024)

In 1971, Lord Sandford – a Conservative minister – stood up in the House of Lords and explained that “by and large, the system of rent regulations introduced by the [Heath] government is working well”.

His colleague, Julian Amery, made an identical statement in the Commons on the same day. Rent controls, they said, were “fair to both landlords and tenants”. No government minister could begin to describe today’s housing system in such glowing terms without being laughed out of the chamber.

Sandford and Amery were speaking to introduce the conclusions of the Francis Committee, which was one of several major national inquiries into the twentieth century’s system of rent controls.

The first, in 1918, concluded that controls (which had been brought in three years earlier) were so popular and effective that a majority of landlords supported them.

Over the next 70 years, governments of all stripes maintained and cherished a system that ensured that housing was affordable, that taxpayers spent very little on landlordism, and that wage bills were not forced to keep pace with rack-renting.

Over the last 25 years, by contrast, the national rent bill has trebled. It rose from less than £30bn in 2000 to more than £90bn today. For scale, at the end of the 1990s, the nation’s landlords received roughly the same amount as its military, but Britain now spends nearly twice as much on landlordism as it does on defence.

A great deal of this is funded by the taxpayer – only three Whitehall departments have budgets that are larger than the housing benefits bill. The remaining costs are borne, indirectly, by employers.

The curious thing is that the same period has seen an impressive per-capita growth in housing supply. Since the relatively comfortable days of the 1990s (at least in housing terms), England has seen its ratio of homes-per-head rise from 0.41 to 0.44 – an increase of more than 7pc.

Housing has not just kept pace with population growth, but has outstripped it. It is difficult to make a case that the present crisis is founded on migration or scarcity – rents have tripled even while net housing stock has been growing.

Instead, what we have seen are the long-term effects of the abolition of rent controls in the late 1980s. Thatcher’s deregulation of tenants’ rights had the specific aim of “tempting landlords back into the market”, and we are now in the absurd position that we have four times as many landlords as teachers.

This cohort is a phenomenal drain on resources, diverting funds from economically useful activities into unearned personal wealth.

To give an example of the mischief of landlordism – at the start of the pandemic, the Government raised the housing benefit rate in an attempt to ward off lockdown-related arrears. At that time, I was working with a community group, and one of our members immediately received a letter from her landlord notifying her that the rent would be put up to match the new housing benefit level.

Without rent controls, even the most benevolent social policy can serve to simply increase the transfer of wealth from the taxpayer to an asset-holder.

And this rent increase did not only improve the landlord’s monthly income, it also meant that our member’s home generated a better yield. The home had therefore become commensurately more valuable as a commodity to anyone else who wanted to buy it.

This is a problem, because homebuyers (particularly first-time buyers) are forced to compete with buy-to-let landlords. The housing market does not distinguish between landlords and occupiers, and the value of housing therefore reflects the price that the average landlord would be willing to pay.

Landlords are willing to pay rather a lot, given the pace at which rents rise, which means that the profitability of the private rented sector drives up the cost of housing across the board.

In other words, unfettered landlordism is a problem for everyone. It is the enemy of affordable house prices, a public spending black hole, and a key driver of the need for wage increases.

There are wider social consequences, too. Local authorities like Nottingham and Croydon have declared bankruptcy in recent months. The UK’s second city, Birmingham, is facing a 100pc cut to its arts and cultural funding. These councils are candid about the fact that landlordism is at the heart of their budget problems.

The cost of temporary accommodation is one major cause. Another is the cost of homelessness, which tends to be caused by “economic evictions” (rent increases, and the generalised unaffordability of the private rented sector).

We could, if we wanted to, decimate local authority spending by restoring rent controls, but it seems that we would prefer to see local government flounder.

Opponents of rent controls often try to distract us with theoretical discussions about policy failures in San Francisco or Berlin or New York. They have less to say about recent cases like Barcelona, where the implementation of rent controls has worked well.

But the simple point is that we know for a fact that rent controls were a great success in Britain for the best part of a century. This is not a case of taking a radical idea from elsewhere and testing it in Britain, but a case of reversing the abolition of rent controls and re-introducing the much better system that saw us through the twentieth century.

Admittedly, the recent Scottish experience also shows that the re-introduction of rent controls can be difficult. It can lead to urgent rack-renting, as landlords exploit the last of the sunshine to make their hay. Structural changes in the economy are often painful to implement.

But the question that faces us is whether the disease is worse than the cure.

This is a question that we ought to put to the UK’s world-beating homeless population, to the tenants paying increasingly unaffordable rents, to the taxpayers and employers who are sponsoring those payments, and to the homebuyers who are forced to compete with the money-printing system of buy-to-let landlordism.

Rent controls may have their disadvantages, but their absence is intolerable.

An aversion to free-market landlordism is not nearly as bizarre or outrageous as it sounds. Calls to increase the numbers of first-time buyers or to boost the amount of social housing are, by definition, demands for a smaller private rented sector, as the households concerned move from one form of tenure to another.

And we have come startlingly close to abolishing the private rented sector altogether. In the mid-1970s, there was a broad consensus that private landlordism was shrinking so quickly that it would soon reach the point of collapse. Conservatives responded with a mixture of enthusiasm and indifference, as private renting gave way to the other, better, forms of tenure.

Past experience shows that a decline in the private rented sector does not amount to a decline in the number of homes, but instead to the retooling of those homes as owner-occupied or social housing. When land markets are not dominated by uncontrolled rent-seeking, it also becomes much easier for local authorities to acquire sites for new affordable homes.

Indeed, it is remarkable that the Conservatives have become so convinced that private landlordism is such a good, necessary thing, given the horrifying realities of the present housing situation.

Anyone who rents today will have come to see the annual rent-gouging ritual as an inevitable and natural fact of life. But it needn’t be, and those soaring housing costs have broad and drastic implications for everyone.

It is within our ability to put a stop to this, and to return to the sensible, popular mechanism that so successfully dominated twentieth century housing policy. We know from experience that it worked – that it was (to use the words of Conservative ministers) “fair to both landlords and tenants”.

It is time to admit that the experiment in abolishing rent controls has failed.

Nick Bano is a barrister at Garden Court Chambers, and author of Against Landlords.

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Abolishing radical rent controls has failed – Britain needs a rethink (2024)
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